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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials
Variable inputs
Natural Monopoly
Profit Maximizing Resource Employment
Absolute Advantage
2. The imbalance between limited productive resources and unlimited human wants
Marginal Productivity Theory
Marginal Analysis
Scarcity
Short run
3. 0 < Ei < 1
Fixed inputs
Price elastic demand
Market power
Necessity
4. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Production function
Law of Diminishing Marginal Utility
Incidence of Tax
Excise Tax
5. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Marginal Productivity Theory
Total Fixed Costs (TFC)
Marginal Analysis
Derived Demand
6. The change in quantity demanded resulting from a change in the price of one good relative to other goods
Substitution Effect
Incidence of Tax
Market Economy (Capitalism)
Price discrimination
7. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Resources
Market Economy (Capitalism)
Normal Profit
Price discrimination
8. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms
Allocative Efficiency
Monopoly long-run equilibrium
Demand for Labor
Opportunity Cost
9. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Perfectly elastic
Explicit costs
Implicit costs
Law of Demand
10. The output where ATC is minimized and economic profit is zero
Break-even Point
Normal Goods
Price inelastic demand
Price elastic demand
11. Models where firms agree to mutually improve their situation
Monopsonist
Collusive oligopoly
Marginal Resource Cost (MRC)
Law of Increasing Costs
12. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Negative externality
Natural Monopoly
Consumer surplus
Decreasing Cost industry
13. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Economies of Scale
Increasing Cost Industry
Productive Efficiency
Luxury
14. Occurs when LRAC is constant over a variety of plant sizes
Absolute Advantage
Market power
Market Equilibrium
Constant Returns to Scale
15. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Monopoly
Total Revenue Test
Perfectly inelastic
Perfectly elastic
16. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good
Marginal Resource Cost (MRC)
Complementary Goods
Spillover benefits
Profit Maximizing Rule
17. ATC = TC/Q = AFC + AVC
Average Total Cost (ATC)
Law of Diminishing Marginal Utility
Opportunity Cost
Spillover benefits
18. Entry of new firms shifts the cost curves for all firms upward
Marginal Cost (MC)
Increasing Cost Industry
Normal Profit
Determinants of Supply
19. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Explicit costs
Increasing Cost Industry
Profit Maximizing Resource Employment
Perfect competition
20. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage
Private goods
Four-firm concentration ratio
Price Ceiling
Monopoly
21. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately
Complementary Goods
Relative Prices
Average Variable Cost (AVC)
Implicit costs
22. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry
Law of Diminishing Marginal Utility
Law of Supply
Oligopoly
Price Elasticity of Supply
23. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.
Marginal Resource Cost (MRC)
Excise Tax
Total Fixed Costs (TFC)
Substitute Goods
24. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Negative externality
Law of Supply
Implicit costs
Diseconomies of Scale
25. A good for which higher income decreases demand
Marginal Cost (MC)
Constant Returns to Scale
Inferior Goods
Excess Capacity
26. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur
Total Welfare
Explicit costs
Accounting Profit
Marginal Revenue Product (MRP)
27. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand
Normal Goods
Monopolistic competition
Determinants of Demand
Price Elasticity of Supply
28. The lost net benefit to society caused by a movement away from the competitive market equilibrium
Monopolistic competition long-run equilibrium
Market power
Excise Tax
Dead Weight Loss
29. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic
Surplus
Break-even Point
Incidence of Tax
Price discrimination
30. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received
Constrained Utility Maximization
Private goods
Marginal Cost (MC)
Total Revenue
31. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it
Positive externality
Fixed inputs
Utility Maximizing Rule
Free-Rider Problem
32. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Utility Maximizing Rule
Specialization
Perfectly elastic
Market Economy (Capitalism)
33. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good
Spillover costs
Short run
Excise Tax
Economies of Scale
34. Es = (%dQs) / (%dPrice)
Spillover benefits
Production function
Price Elasticity of Supply
Decreasing Cost industry
35. Ed = 8 - infinite change in demand to price change
Perfectly elastic
Specialization
Shutdown Point
Accounting Profit
36. All firms maximize profit by producing where MR = MC
Diseconomies of Scale
Profit Maximizing Rule
Absolute prices
Total Revenue
37. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.
Complementary Goods
Marginal Revenue Product (MRP)
Marginal Resource Cost (MRC)
Production function
38. Ed = 0 - no response to price change
Collusive oligopoly
Average Total Cost (ATC)
Marginal tax rate
Perfectly inelastic
39. The marginal utility from consumption of more and more of that item falls over time
Profit Maximizing Rule
Price floor
Implicit costs
Law of Diminishing Marginal Utility
40. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital
Variable inputs
Non-collusive oligopoly
Determinants of elasticity
Fixed inputs
41. The additional cost incurred from the consumption of the next unit of a good or a service
Collusive oligopoly
Excise Tax
Marginal Cost (MC)
Price Ceiling
42. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good
Normal Profit
Long Run
Public goods
Perfectly inelastic
43. The rational decision maker chooses an action if MB = MC
Price inelastic demand
Substitution Effect
Necessity
Marginal Analysis
44. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income
Marginal tax rate
Explicit costs
Income Effect
Increasing Cost Industry
45. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run
Relative Prices
Shutdown Point
Negative externality
Resources
46. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand
Incidence of Tax
Short run
Income Effect
Determinants of elasticity
47. AFC = TFC/Q
Average Fixed Cost (AFC)
Economic Profit
Average Total Cost (ATC)
Long Run
48. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF
Economies of Scale
Allocative Efficiency
Shortage
Total Product of Labor (TPL)
49. Total product divided by labor employed. APL = TPL/L
Average Product of Labor (APL)
Normal Profit
Normal Goods
Economic Growth
50. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Utility Maximizing Rule
Long Run
Producer surplus
Total Revenue Test